Tax Accounting

11i Asset Management Fundamentals

Copyright Oracle Corporation, 2002. All rights reserved.

Objectives

After completing this module, you should be able to do the following: Discuss the key options and decisions required when creating a tax asset book Add assets into a tax asset book using the Initial Mass Copy function Add assets into a tax asset book using the Periodic Mass Copy function Manually add assets to a tax asset book

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Copyright Oracle Corporation, 2002. All rights reserved.

Objectives

Discuss populating tax reserves when adding assets to the tax asset book Explain how you can use Asset Management to calculate deferred depreciation and future deferred income tax liability Explain how Asset Management handles tax credits

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Copyright Oracle Corporation, 2002. All rights reserved.

Agenda

Creating a Tax Asset Book Entering Information in Tax Books Tax Rules Deferred Taxes Adjusting Depreciation Reserves CIP Assets in Tax Books Tax Reports

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Creating a Tax Book

Assets in Independent Asset Books
Corporate book FURNITURE.DESKS Straight-line 5 years MID-MONTH

Asset 325

Monthly calendar

VEHICLE.OWNLUXURY Straight-line 4 years MID-MONTH Asset 843

Tax book

FURNITURE.DESKS MACRS 5 years HALF-YEAR

VEHICLE.OWNLUXURY MACRS 4 years HALF-YEAR
Copyright Oracle Corporation, 2002. All rights reserved.

Asset 325

Quarterly calendar
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Asset 843

Asset Books Regions

Define Asset Books

Calendar

Accounting Rules

Natural Accounts

Journal Categories

4 Regions

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Prerequisites for Setting Up Tax Book Asset Categories

Setup category flexfield Setup account segment values and combinations Setup asset books Setup QuickCode values Setup prorate conventions Setup depreciation methods

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Entering Information in Tax Books

Corporate Book

Initial Mass Copy

Periodic Mass Copy

Manual Entry

Tax Book
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Tax Book
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Tax Book

Populating the Tax Book by Initial Mass Copy

Corporate book

Fiscal calendars

Copy 1999 2000 2001 Fiscal 2002 (Current year)

Tax book
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DEC - 01 (Initial period)

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Fiscal 2002 (Not yet open)

Populating the Tax Book

Data Copied During Initial Mass Copy
Information Copied Information Not Copied

Cost

Original cost
Units Date placed in service Capacity and unit of measure

Assets retired before the end of the fiscal year Assets added after the end of the fiscal year Expensed items Revaluations

Salvage value

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Copyright Oracle Corporation, 2002. All rights reserved.

Populating the Tax Book by Periodic Mass Copy

Corporate book

May 2002

June 2002

July 2002

August 2002 (open period)

Tax book

May 2002

June 2002

July 2002 (open period)

August 2002 (not yet open)

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Updating a Tax Book Manually

Asset in Corporate Book

Manually Add in Asset Workbench

Asset in Tax Book

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Tax Book Upload Interface

Asset added to Corporate book

Asset copied to Tax book

FA_TAX_INTERFACE Updated data in Tax Book

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Discussing Tax Rules

Calculating Investment Tax Credits (ITC)

ITC amount

ITC basis ITC rate

Recoverable cost

Current cost Salvage value (ITC basis Basis reduction rate)

ITC recapture

ITC amount ITC recapture rate (Cost retired / Current cost)

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Copyright Oracle Corporation, 2002. All rights reserved.

Discussing Tax Rules

Depreciation ceiling: Capital gain threshold: The maximum depreciation taken for an asset The minimum time to hold an asset before reporting a capital gain upon retirement

Capital gain = Asset holding time > threshold Ordinary income = Asset holding time < threshold Adjusted current earnings: A depreciation rule defined by the United States tax law

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Deferred Depreciation
Asset # 10123 Cost $110,000

Corporate Book STL 5 Year Year 1 Depreciation = $ 22,000

Tax Book MACRS 3 Year Year 1 Depreciation = $ 36,663

$ 14,663 Year 1 Deferred Depreciation

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Calculating Deferred Depreciation

Calculating Deferred Depreciation for a $ 5,000 asset
Year of Life 1 2 3 4 5 Corporate Book Tax Book Deferred STL Accelerated Depreciation Depreciation Depreciation 1,000 1,000 1,000 1,000 1,000 3,000 1,500 300 150 50 2,000 500 -700 -850 -950

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Adjusting Accumulated Depreciation

Adjust for a single asset

Adjust for all assets

Tax book
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Adjusting Depreciation Reserve for a Single Asset

Fiscal Yr 2001 (Closed)

Fiscal Yr 2002 (Current)

Depreciation Reserve
Current YTD Depreciation

$ 200,000

$ 200,000
$ 50,000

Adjustment
Adjusted Reserve

($ 20,000) $ 180,000

($ 20,000) $ 230,000

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Adjusting Depreciation Reserve for All Assets

Enter adjustment factor Adjustments made by comparing values in all three books

All assets in a Tax book

Control Tax book

Corporate book

Tax book

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Controlling Mass Depreciation Adjustment

Status New Preview Previewed Definition New adjustment Report running Report successful Possible Action Preview None Run adjustment Modify adjustment definition Preview Preview None Preview Review

Updated Running Error Completed

Adjustment updated Adjustment running Report or adjustment ended in error Adjustment successful

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Calculating Mass Depreciation Adjustment

Minimum Accumulated Depreciation 1. The adjusted tax book at the beginning of the fiscal year? Maximum Accumulated Depreciation 1. The adjusted tax book at the end of the fiscal year?

Is the greatest of the accumulated depreciation in

2. The control tax book at the end of the fiscal year? 3. The corporate book at the end of the fiscal year?

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Copyright Oracle Corporation, 2002. All rights reserved.

Automatically Adding CIP Assets to Tax Books

You have the option of adding and maintaining CIP assets in your tax book and corporate book simultaneously. To enable this function, select the Allow CIP Assets check box in the Book Controls window for the tax book.
Mass Additions

CIP Assets Corporate Book

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Tax Book

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General Tax Reports

Name
Annual Additions Report Capital Spending Report Property Tax Report Tax Preference Report Revalued Asset Retirements Report Recoverable Cost Report

Description
Shows additions by date placed in service Shows assets added before cutoff date for a fiscal year Shows assets by location Compares corporate and tax book depreciation Shows gain or loss calculated using price index to revalue asset cost Shows the recoverable cost for each asset in the corporate book and the tax book for a specific accounting period Provides an audit trail of depreciation reserve adjustment Shows the asset additions and capitalizations for the period range you select Shows depreciation expense for the specified period Shows gain or loss and any ITC recaptured for asset retirements

Reserve Adjustments Report Tax Additions Report

Tax Reserve Ledger Report Tax Retirements Report

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Special Tax Reports

Tax Feature Reports
Investment Tax Credit Report Revalued Asset Report US Tax Form Reports Form 4562: Depreciation and Amortization Report Form 4626: AMT Reports Review the depreciation taken for the fiscal year you specify Review the difference in yeartodate depreciation between any tax book and an alternative minimum tax (AMT) Shows asset retirements which have the retirement type you request, and whether you held this asset as a long or short term Calculate gain or loss amounts for sales of 1245 or 1250 property held longer than the capital gain threshold Shows retired assets without a 1245 or 1250 property class Shows retired assets to which you did not assign retirement types Shows the amount of investment tax credit (ITC) you can claim on the assets you add Shows asset retirements revalued according to a price index

Form 4684: Casualties and Theft Reports Form 4797: Gain from Disposition of 1245/1250 Reports Retired Assets without Property Classes Retired Assets without Retirement Type

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Depreciation Adjustment Reports

Includes the effects of any tax Adjusted Form 4562: Depreciation and Amortization reserve adjustments you made for the fiscal year you specify Report See the effects of reserve adjustments of the period you Adjusted Form 4626: AMT select if you adjusted the Detail and Summary Reports accumulated depreciation for the fiscal year Shows you the effect the Mass Depreciation Adjustment adjustment you specified will have Preview Report on the yeartodate depreciation for assets in your adjusted tax book Review the effect of a mass Mass Depreciation Adjustment depreciation adjustment after you Review Report run it

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Copyright Oracle Corporation, 2002. All rights reserved.

Summary

Upon completing this module, you should now be able to: Discuss the key options and decisions required when creating a tax asset book Add assets into a tax asset book using the Initial Mass Copy function Add assets into a tax asset book using the Periodic Mass Copy function Manually add assets to a tax asset book

1-27

Copyright Oracle Corporation, 2002. All rights reserved.

Summary

Discuss populating tax reserves when adding assets to the tax asset book Explain how you can use Asset Management to calculate deferred depreciation and future deferred income tax liability Explain how Asset Management handles tax credits

1-28

Copyright Oracle Corporation, 2002. All rights reserved.